Breaking the reactive cycle in-house

Breaking the reactive cycle in-house
Law departments across Canada should see themselves, and be seen company-wide, as integral parts of their corporate clients’ businesses. As in-house counsel, we can provide much more value if we’re not merely a group that’s brought in just to give a last-minute legal blessing or to fix a problem that has already arisen.
We need to convince our internal clients that we can provide the most value to them if they view us as more than a less expensive alternative to outside counsel.

As the chief lawyer at Capital Power  Corp. (and its predecessor) since 2004, the first part of the struggle has already been won. My company’s executives understand that having in-house counsel handle the company’s constant, core legal work is almost always preferable to hiring an outside law firm because of the relative costs. By my own calculations, which I have driven home to top management, an hour of an inside lawyer’s time, fully allocated for the lawyer’s salary, benefits, travel, training, office space, and all similar expenses, costs the company less than $100 per hour. An hour of a law firm attorney’s time, in contrast, costs between $300 and $900 per hour.

Acting before the 11th hour

The problem, though, is that too often a company’s leaders simply act as if the in-house lawyers should be brought in to a matter in the same way as a partner in a law firm would be brought in, and at the same stage. That means, in my experience, that a legal team often doesn’t get involved in a project until the eleventh hour — and the team has no time to plan for contingencies or to anticipate crises before they happen.

I learned some ideas to get past this issue when I attended a recent discussion, sponsored by the Association of Corporate Counsel, with 12 chief legal officers from Western Canada. The discussion was wide-ranging but I was particularly interested in an idea raised by one of my colleagues.

This chief legal officer said that in-house counsel provide three different types of service: 1) a “help desk” that provides quick, informal, yet valuable advice over the phone and by e-mail; 2) legal project work, such as major contracts and M&A work; and 3) risk management activities initiated by the in-house lawyers themselves, such as when needed to address a new legal standard or regulatory requirement. While external counsel can ably support legal project work (albeit more expensively than internal counsel), internal counsel are uniquely well-suited to provide the help desk-type support, and to know when to initiate risk management or legal compliance activities, because we have the institutional knowledge.

Practicing preventative law

Many companies haven’t really addressed their minds to the fact that in-house lawyers can be most effective when practicing preventive law. We need to convince the other executives to treat us differently from outside lawyers. We can add the most value when we are helping the company to avoid having bad things happen, rather than trying to fix a problem that has already risen. That is really a mental paradigm shift for companies. We don’t want to come in at the last moment to put out a fire. We need to break the reactive cycle.

In my view, the current corporate focus on measurable performance metrics is partly to blame for this mindset. It is much easier to demonstrate the value of internal counsel by showing the straight hourly savings that can be made. It is much more difficult to measure the value of proactive risk management. So, then, how do you measure the benefit of avoiding something? The only way is to convince other executives that some of the last-minute legal work wouldn’t be necessary at all with adequate up-front planning.

One way to start demonstrating the proactive value of legal departments is by counting the number of times when help desk-type services cause employees to change course to avoid a legal pitfall, and the number of times the department initiates proactive legal risk management activities on its own. This new way of thinking about how to harness internal lawyers’ institutional knowledge will not only add unique, and measurable, value to in-house lawyers, but it will also better direct their efforts to provide first-rate legal services to their clients in Canada.

Kate Chisholm is senior vice president of legal and external relations at Capital Power, and a member of the board of directors of the Association of Corporate Counsel.

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